source document

• The accounting process


  1. Source documents

  2. Records

  3. Reports

  4. Advice
• Information communicated to the owner via the reports


  The product of the recording system, which summarieses and classified transaction
• Records


  Generated from the raw data provided in source documents
• Source documents


  • Provide the verification evidence of the details of a transaction
  • Provide the evidence that is required by the ATO relating to the firm's income tax and Goods and Services Tax obligations
• Source documents must be stored and filed in a safe and organised manner
• Goods and service tax (GST)


  • A 10% tax levied by the federal government on sales of goods and services
  • The federal government taxes consumers 10% of the price of whatever they have purchased with the business that sells the goods and services acting as a tax collect for the ATO
  • Any GST the business pays to its suppliers will reduce the amount it owes to the ATO
• Tax invoice


  • The source document used to verify a transaction involving the GST
  • Must include the words 'tax invoice' stated clearly, the name of the seller, the Australian Business Number (ABN) of the seller, the date of the transaction, a description of goods/services provided, the price of the transaction including the GST, the amount of the GST
  • Fees of more than $1000 must also show the name and address or ABN of the buyer
• Cash receipts


  • Can refer to both the transaction that occurs when cash is received from another entity or the source document that verifies that transaction
  • All cash received must be evidenced either by a cash receipts or a cash register receipt
• Cash payments


  All cash payment for goods and services should be evidenced by a source document
• Cheque


  • The cheque itself is a document informing the Bank the drawee to transfer funds from the account of the drawer to the bank and account of the payee
  • Drawee is the financial institution or bank of the drawer
  • Drawer is the entity writing the cheque
  • Payee is the entity that is receiving the cheque or to whom the cheque is written
  • It is a sensible business practice to nominate the payee and cross it not negotiable
• Cash payments and the GST


  If a business has paid any GST to its supplier, it is allowed to be deducted from the GST it owes
• Petty cash system


  A small amount of cash is set aside with individuals reimbursed from the petty cash fund for a small amounts they have paid on the firm's behalf
• Bank statement


  • A statement provided to customers by their bank institution that gives detail of all cash transactions relevant to that particular account that have occurred over a specified period of time and the resulting balance at the of that period
  • Provide a list of all transaction that can be used as a point of comparison to ensure all transactions are legitimate and provide a balance of the account at the end of a specified period
  • Identify transactions that you may have been unaware of such as direct debit, direct credit or direct deposits from other entities
• Credit transaction


  • The sales or purchase of a good or service occurs at the same time as the cash is exchanged
  • Effectively separates a sale or purchase into two transactions
• Invoice


  • A source document used to verify credit transactions
  • Due to GST being recognised and reported at the time of purchase or sale, the invoice must also show all the information necessary fo it to be classified as a tax invoice
• Sales invoice


  • The seller or supplier is the business that issues the invoice
  • The purchaser or customer is names in the middle of the invoice
  • The original is sent to the customer with the copy being retained by the seller for its recording purposes
• Credit note


  • A document that provides evidence of a reduction of what is owed to a particular supplier by one of its customers
  • Relates to a previous credit transaction and can be issues for a variety of reasons
• Purchase invoice


  • When business receive good from it supplier, it is provided with a purchase invoice
  • It outline what had been purchased
  • The seller or supplier is the business that issues the invoice so its name will be at the top of the invoice
• Statement of account


  • Is provided to customers who purchase goods and service using credit
  • A document that can be used to verify transactions that have occurred over a specified period of time and gives a balance owing at the end of that period
• Memo


  • Some transactions will not be evidenced by any of the above documents as they do not involve a sale or purchase
  • Memos can be issues for any number of transaction that can not be evidenced by standard source documents